NZD/USD Pulls Back As Key Support Area Holds Off

The New Zealand Dollar (NZD) pulled back and extended upside movement against the US Dollar (USD) on Wednesday, increasing the price of NZD/USD to more than 0.8080 following the release of some major economic events. The bias has turned bearish due to Lower Low in the ongoing correction wave.

Technical Analysis

As of this writing, the pair is being traded around 0.8081. A support can be noted near 1.8050, the swing low of the last major dip as demonstrated in the following chart. A break and daily closing below the 1.8050 support area could spur a renewed correction wave, validating a fresh downside move below the 0.8000 milestone.

On the upside, the pair is expected to face a hurdle near 0.8146, the intraday high of yesterday ahead of 0.8235, the 76.4% fib level and then 0.8350, the 61.8% fib level. The bias will however remain bearish as far as the 0.8515 resistance area is intact.

Kiwi Trade Balance

The trade deficit in New Zealand remained $472 million in August as compared to $724 million deficit in the month before, exceeding the median projection of $1275 million trade deficit. The Kiwi economy however witnessed $2.02 billion trade surplus in August as compared to $1.29 billion surplus in the same month of the year before, up beating the average forecast of $1.22 billion. Generally speaking, higher trade surplus is considered positive for the economy thus a better than expected actual outcome spurred bullish momentum in the price of NZD/USD.

Trade Ideas

Keeping in view the overall technical and fundamental outlook, buying the pair around the current levels appears to be a good strategy in short to medium term if the price leaves a bullish pin bar, bullish engulfing pattern or hammer on the daily chart. 

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